Bruce Bartlett

On May 29, London's Financial Times reported some startling news about the U.S. national debt. Instead of being about $3.5 trillion, as commonly understood, it was actually $44 trillion, according to a suppressed Treasury Department report by economists Kent Smetters and Jagadeesh Gokhale.

This was an odd story to put on page one, since it mostly just repeated information that had been in the public record for a while. Smetters revealed the $44 trillion number during congressional testimony on March 6. On May 9, the supposedly suppressed report was the object of a conference at the American Enterprise Institute and was posted on the institute's website. On May 19, economists Laurence Kotlikoff and Jeffrey Sachs published an op-ed article in the Boston Globe that discussed the study in detail.

Moreover, the idea that the study was suppressed in any way fell apart when the authors denied it. This fact was easily confirmed because the Financial Times posted interviews with the study's authors on its website in which they rejected the charge. It also turned out that much of the substance of the study appeared in the 2004 budget in a chapter titled "The Real Fiscal Danger," as well as the Financial Report of the United States Government released in March.

Once these facts became known, the press lost interest in the story. No American paper followed up on the Financial Times report. However, it continues to be a topic of interest in cyberspace, where several websites known as "blogs" have run extensive commentaries. These include those of economists Brad DeLong and Kevin Drum.

The first thing to know is that this $44 trillion figure is based on projecting taxes and government spending under current law in perpetuity -- two-thirds of the debt comes more than 75 years in the future. To put the numbers into today's dollars, they are adjusted both for inflation and the rate of interest. When calculating figures this way, very small changes in assumptions can radically alter the results. In any case, the debt is not particularly large when put in context. When the size of the future economy is calculated the same way as the $44 trillion debt figure, it comes to $682 trillion. Thus this astronomical debt that so alarmed the editors of the Financial Times turns out to equal just 6.5 percent of the gross domestic product -- something to be concerned about, but hardly a crisis in the making.


Bruce Bartlett

Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.

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